Target and Toys R Us posted overall sales declines during the holidays.
The e-retailer will spend $775 million for the fulfillment services provider.
Amazon.com Inc. late today said it will buy fulfillment services provider Kiva Systems Inc . for approximately $775 million in cash. Amazon, No. 1 in the Internet Retailer Top 500 Guide, expects to close the deal in the second quarter.
Kiva sells robotic warehouse technology that automates much of the fulfillment process. Kiva’s robots use special software that instructs them how to find ordered products on portable racks and bring them to warehouse pick-and-pack stations. Such retailers as Office Depot Inc. (No. 5 in the Top 500), Gilt Groupe Inc. (No. 49), Toys ‘R’ Us Inc. (No. 29) and Follett Higher Education Group (No. 58) have used Kiva technology.
“Amazon has long used automation in its fulfillment centers, and Kiva’s technology is another way to improve productivity by bringing the products directly to employees to pick, pack and stow,” says Dave Clark, vice president, global customer fulfillment, Amazon.com. “Kiva shares our passion for invention, and we look forward to supporting their continued growth.”
Paula Rosenblum, managing partner of research and advisory firm Retail Systems LLC, says the acquisition appears to be a good fit for both Amazon and Kiva. “The value of good material handling systems is in keeping costs low, and the best materials handling systems have always brought the work to the workers, rather than bringing the workers to the work,” she says.“ Amazon obviously feels that owning the technology will give them a strategic cost advantage in the industry. What does it mean for Kiva itself? Certainly a long and prosperous future is in the cards.”
“This acquisition is largely based on technology,” adds Colin Sebastian, senior research analyst, Internet and interactive entertainment, at investment banking firm Robert W. Baird & Co. “It’s technology that Amazon can use to drive more efficiency and capacity within its own warehouses. I think it also allows Amazon to extend its third party services platform into logistics. I don’t expect any changes for Kiva clients, unless they object to Amazon owning the company.”
Amazon says it will keep Kiva Systems’ headquarters in North Reading, MA. "Kiva customers will continue to receive service and support after the transaction," an Amazon spokeswoman says.
At the Internet Retailer Conference & Exhibition 2012, Sean Cook, CEO, ShopVisible LLC, and Daniel Yen, CEO, MovieMars.com , will speak in a session entitled “Managing inventory in a hyper-fast world.” The IRCE $200 early-bird discount expires March 31.